Between 2000 and 2019, Chinese lenders cancelled about $3.4 billion in loans, according to a report by johns Hopkins University`s (CARI) China-Africa Research Initiative. It also restructured approximately $7.5 billion in loans and refinanced $7.5 billion in additional loans over the same period. China also confirmed that in the first quarter of 2009, 150 zero-interest loans had been eliminated from 32 African countries. Loans to dealers and, preferably, loans to the buyer are subsidized from different budgets. As a result, conceding loans are granted to RMB and solvent loans for buyers preferably in USD. The two products also have different counterparty agreements. Loans granted can finance 100% of the project costs, while the preferred buyer`s loan can only finance up to 85% of the project costs. All these standard credit agreements and other related documents are available to members of the association free of charge on the APLMA website. The impact of legal, regulatory and documentary guarantees on credit financing. More broadly, it is also important for borrowers to understand how they should approach lenders when credit financing is under significant stress. Read our article titled “How to Treat Lenders During COVID-19 – The Elbow” from March 20, 2020, which contains practical tips for borrowers on how to manage lenders during a financial crisis. Many borrowers expect their revolving loan to be reopened (sometimes automatically) for each interest rate period (usually applicable at intervals of 1, 3 or 6 months) until the end of the term of the facility (which can be between 1 and 5 years under a working capital mechanism).

Lenders should check whether COVID-19-related aid measures affect their ability to accelerate and/or implement a late loan. Interestingly, a number of lenders, who have influenced not only life but also livelihoods, have also begun to question whether the courts should intervene or whether they are willing to intervene to provide debtors with COVID-19-related relief when faced with debt disputes. The waiver of sovereign immunity, both with regard to jurisdiction and enforcement, is a norm for loans involving States supported by States or involving State-owned enterprises. This is in line with international lending practice. Given the availability and the fact that conceding loans do not require counterpart financing, CEXIM sometimes offers conceding loans alongside the buyer`s preferred credit, in order to allow the borrower to manage its financing needs. In such cases, covenants are usually coordinated for both entities. Zero-interest loans are not widespread and account for less than 5% of all Chinese loan commitments. However, their relative scarcity makes it easier for China to cooperate with troubled borrowers.

Historically, China has a clear tradition of providing interest-free loans to heavily indebted developing countries that have diplomatic relations with China, including those in Africa. Both products typically cost a fixed interest rate of 1% to 3% – usually 2% – with a grace period of five years and a maximum term of 20 years…